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Super 8 Worldwide, Inc., F/K/A Super 8 Motels, Inc., A South Dakota Corporation v. American Lodging Partners

January 25, 2011

SUPER 8 WORLDWIDE, INC., F/K/A SUPER 8 MOTELS, INC., A SOUTH DAKOTA CORPORATION, PLAINTIFF,
v.
AMERICAN LODGING PARTNERS, INC., AN ILLINOIS CORPORATION,
VIVAK KHANNA, DHARAM VIR, AND DESH MEHTA, DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

This lawsuit arises out of a 20-year license agreement entered into between Super 8 Worldwide, Inc. ("Plaintiff" or "Super 8") and American Lodging Partners, Inc. ("ALP") for the operation of a Super 8 motel in Calumet Park, Illinois. Defendants Vivak Khanna ("Khanna"), Desh Mehta ("Mehta"), and Dharam Vir ("Vir") each provided Plaintiff with a guaranty of ALP's obligations under the license agreement. Before the Court is Plaintiff's motion for partial summary judgment [51]. Plaintiff asks the Court to find that (1) ALP breached the license agreement and unlawfully displayed Plaintiff's various marks; (2) Khanna and Mehta each breached the guaranty; and (3) Plaintiff is entitled to damages, interest, and attorneys' fees and costs from ALP, Khanna, and Mehta.*fn1 For the following reasons, Plaintiff's motion [51] is granted.

I. Background

The Court takes the relevant facts primarily from Plaintiff's Local Rule ("L.R.") 56.1 statement of undisputed material facts [53]. No defendant has filed a response to Plaintiff's L.R. 56.1 statement or requested an extension of time from the Court in which to do so. Accordingly, the facts as set forth by Plaintiff are deemed admitted. See LR 56.1(b)(3)(C).*fn2

Plaintiff Super 8 is a South Dakota corporation with its principal place of business in New Jersey. Plaintiff is one of the largest guest lodging facility franchise systems in the United States. Plaintiff does not own or operate any facilities-instead, all Super 8 facilities are independently owned and operated by franchisees. Plaintiff allows its franchisees to use Super 8's registered trade names, service marks, logos and derivations thereof (collectively, the "Super 8 Marks") pursuant to individualized license agreements with each franchisee.

ALP is an Illinois corporation located in Calumet Park, Illinois. Khanna is president of ALP and resides or transacts business in Chicago. Mehta is a part-owner of ALP and resides in Peoria, Illinois.

On November 30, 2004, Plaintiff entered into a license agreement with ALP for the operation of a 93-room motel in Calumet Park, Illinois (hereinafter "License Agreement" or "Agreement"). The Agreement had a 20-year term. The License Agreement permitted ALP to use the Super 8 Marks in connection with the operation and use of the motel. Pursuant to Section 7 and Schedule C of the License Agreement, ALP was required to make certain periodic payments to Plaintiff for royalties, service assessment, taxes, interest, reservations system user fees, annual conference fees, and other fees (collectively, the "Recurring Fees"). Under Section 7.3 of the Agreement, ALP agreed to pay interest at the rate of 1.5% per month (or the maximum rate permitted by applicable law, whichever was less) on past due amounts owed to Plaintiff under the Agreement.

Section 11.1 of the License Agreement specified the various ways in which ALP could be in default of the Agreement, which included failing to pay Plaintiff when a payment was due. Section 11.1 stated that if ALP's failure to pay was not cured within ten days after receiving written notice of the default, Plaintiff had the right to terminate the Agreement.

Section 13 specified ALP's obligations in the event the Agreement was terminated, including its obligation to immediately cease using all of the Super 8 Marks.

Section 12.1 of the Agreement provided that ALP would pay liquidated damages to Plaintiff within 30 days following the date of termination in accordance with a formula specified in the License Agreement.*fn3 The liquidated damages in were to be "paid in place of our claims for lost future Recurring Fees under the Agreement." (License Agreement at § 12.1). Pursuant to Section 17.4, ALP agreed that in the event that Plaintiff was required to take action to enforce the License Agreement, the non-prevailing party would "pay all costs and expenses, including reasonable attorney's fees, incurred by the prevailing party to enforce this Agreement or collect amounts owed under this Agreement."

Effective as of the date of the License Agreement, Khanna and Mehta provided Plaintiff with a guaranty of ALP's obligations under the License Agreement (the "Guaranty"). The one-half page, three-paragraph Guaranty provided in part that Khanna and Mehta would "jointly and severally * * * irrevocably and unconditionally * * * guaranty that [ALP's] obligations under the Agreement, including any amendments, will be punctually paid and performed." Upon default by ALP and notice by Super 8, Khanna and Mehta promised to "immediately make each payment and perform or cause [ALP] to perform each unpaid or unperformed obligation of [ALP] under the Agreement." Khanna, Mehta, and Vir each signed the Guaranty and the document was also signed by three witnesses.

On November 30, 2004, Plaintiff and ALP entered into an addendum to their agreement-the Satellite Connectivity Services Addendum (the "Addendum"). Pursuant to section 13(c) of the Addendum, ALP agreed that in the event of termination, it would pay damages to Plaintiff in the amount of $1,000 within 10 days following the date of termination.

On March 30, 2006, Plaintiff sent ALP a letter advising ALP that it was in default of the License Agreement by failing to pay Recurring Fees and other charges owed under the Agreement in the amount of $56,075.37. The letter enclosed an itemized statement detailing the fees past due. ALP was given 30 days to pay and was advised that failure to pay within that time could result in termination of the Agreement. Khanna, Vir, and Mehta also were copied on the letter.

On July 10, 2006, Plaintiff sent ALP a second letter, advising that ALP remained in default and now owed $100,784.44 under the Agreement. Plaintiff gave ALP an additional 30 days to pay and advised that this period was "a final opportunity to avoid termination." Khanna, Vir, and Mehta were copied on this letter as well.

On August 11, 2006, Plaintiff sent a third letter, advising ALP that the License Agreement had been terminated, effective August 11, 2006, because of ALP's continued failure to pay the amounts owed under the Agreement. The letter estimated that as of August 4, 2006, those fees equaled an estimated $118,156.28. The letter also advised that ALP owed $216,788.40 in liquidated damages pursuant to the terms of the Agreement. The August 11, 2006 letter reminded ALP of its "post-termination obligations" including "removal of all items that display or refer to the Super 8 brand at the Facility" within 14 days of the date of the letter. Khanna, Vir, and Mehta were copied on the termination letter.

Following termination of the License Agreement, ALP continued to use the Super 8 Marks without authorization to induce the traveling public to rent rooms at the motel. ALP did not remove the Super 8 signage and continued to identify the motel as a Super 8 facility in response to ...


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